Coupon and cash-back services navigate tough economic times for shoppers

During the Great Recession, if shoppers didn’t go to dollar stores—or retailers weren’t going to offer less expensive products—they were on the hunt for deals.

Lehman Brothers filing for bankruptcy ahead of the 2008 holiday shopping season signaled that consumers needed to ease up their spending, which led retailers to slash prices by as much as 80%.

Coupon and cash-back services also grew in popularity around this time. The current economic conditions suggest that this is an environment where those same companies would thrive, but a new retail landscape alongside evolving consumer habits and expectations has created new obstacles.

Cash grab: Rakuten Rewards, for example, saw growth as a result of the 2008 recession, which has continued as e-commerce has grown, its president, Kristen Gall, told Retail Brew. The company’s revenue comes from affiliate network links on its site where members click through the links before shopping at a retailer’s site.

• Retailers then split a 50% commission to Rakuten on any purchases made.
• Rakuten has about 17 million members, who Gall said tend to be a high-income, discretionary shopping–oriented demographic, as opposed to coupon clippers and bargain hunters.

“With all of these things that have been happening in the economy, you worry that people are going to stop shopping. And that’s not been the case on our platform,” she said. “We do have shoppers right now that are weathering all of this inflationary pressure. They’re weathering all of the weird things happening in the economy, and they are shopping.”

Gall added Rakuten Rewards saw an acceleration in retailers offering deals and discounting; in fact, almost 5% of the volume between Black Friday and Cyber Monday runs through the Rakuten platform.

• Additionally, Gall said the company’s average order value has grown steadily over the past three years—in the “high teens”—but declined to offer a specific number.

“From our perspective, it’s really healthy right now. I say ‘right now’ because this could be something that follows us through the holiday shopping season,” she said. “There’s a possibility that it ends a little bit abruptly in Q1 [2023], given the fact that the economy is still pretty challenged.”

Oh yeah, remember that? Despite consumers on the hunt for bargains, Groupon has struggled this year. For Q3, the company reported $144.39 million in revenue, compared to $214.17 million a year earlier.

To weather the storm, the company is looking at new marketing channels like Snapchat, TikTok, and Pinterest to grow its customer base, Melanie Hellenga, VP of global brand and performance marketing at Groupon, told Retail Brew.

• She noted that—as opposed to 2008, when consumers were on the hunt for deep discounting—now they’re looking for more quality products or experiences.
• For merchants, Hellenga said the value proposition for working with Groupon is to acquire new customers (Groupon has 20 million shoppers) and yield management, keeping customers in the door when times aren’t as busy.

“In a cluttered marketplace, we’re really trying to get people to understand our local marketplace and the value proposition around our value that we offer to consumers as well, and bringing those two things together,” she said.